Edited Transcript of PTT.BK earnings conference call or presentation 12-May-20 10:59am GMT

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Bangkok May 21, 2020 (Thomson StreetEvents) — Edited Transcript of PTT PCL earnings conference call or presentation Tuesday, May 12, 2020 at 10:59:00am GMT

Good morning, analysts and managers, executives, ladies and gentlemen. I’m [Bin Sarun] from investor relations of PTT. Welcome to the analyst meeting for First Q 2020. This is the first time that we do it online in accordance with the social distancing measure. You can follow on us WebEx. Many of you are there already as well as Facebook Live, both in Thai and English. We have simultaneous interpretation.

For WebEx, may I go through some briefs for WebEx participants. Please switch off the microphone before you exit the meeting. If you experience any technical difficulties please contact us via the chatbox. I believe that you received the greetings from our staff. You can interact with us there and we are going to have Q&A towards the end. You can do it through the right-hand function or you can submit questions in advance through Q&A function in WebEx or Facebook Live. We have our colleagues handing questions.

Before we start, we are here in full force, starting with Khun Chansin Treenuchagron, CEO and President; Khun Auttapol Rerkpiboon, COO, Downstream Petroleum business; Khun Atikom Terbsiri, COO, Petroleum and Natural Gas; Khun Pannalin Mahawongtikul, CFO; Khun Wittawat Svasti-Xuto, Chief Technology and Engineering Officer; and Khun Arawadee Photisaro, Corporate Strategy.

So I would like to hand over the proceedings to Khun Chansin.

Good morning, dear analysts, here and elsewhere. I would like to remove the face shield as well as the mask because we have maintained reasonable distance.

The operating results 2019 have been captured on video. And today, we would — and 4 months after that, many events have unfolded in such spectacular, unpredictable way caught us some off guard and we have taken quite some time to adjust to the situation. I have — well, tomorrow, we have a new CEO, Khun Auttapol, to my left. He will visualize the future for all of us and the COO, Upstream, in charge of exploration and engineering operations, technology, new S-Curve opportunities as well as CFO, who is in charge of finance, money accounting and all things that result from our operations. And Khun Arawadee who looks after CapEx, investments plans and et cetera. We are here in full force. It’s going to be my final meeting with you, and it will be the first for Khun Auttapol. We do make available plenty of time for Q&A session.

And as we all know, around end of last year, early this year, we experienced the virus in China and now it’s spread to, in fact, 4 million people. 400,000 have died. Fortunately, in Thailand, we have such strong medical professionals who tend to the situation very well.

May I just start in our efforts to pursue sustainable growth role and we stand by our anticorruption stance, and we reaffirm that we are transparent and accountable. So we are recognized by the NACC award for second consecutive years. And this time, PTTEP also received the award as well, Khun Auttapol.

And as we know, people, our workforce, the employees are the most important people. We have a system to protect them and to make sure that the entire workforce is capable of tending to the society as well.

We look after the society in 4 key issues. First of all, we prepare alcohol, hand sanitizer. We sell it at cost or we donate to the Ministry of Public Health to distribute to hospitals and donations in the form of money, medical equipment, PPE and et cetera, because we produce plastic resins and top quality raw materials. And also, we look after the hospitality side, catering through Amazon.

And second, innovation. There are 3 key aspects to innovation. First, production of much needed PPE for the medical professionals, face shields, medical-grade PPE as well as COVID test kits. We are making headways from Siriraj Hospital. Now we distribute Thammasat University. If this is — in the future, if this is proven, then we can do it at scale. This is the innovation we worked on with VISTEC and within our organization.

Next, in the energy sector, LPG, we gave discount. And we joined hand with the Ministry of Energy, we cut the price of NGV for public vehicles, public transport system and we’ve been doing this consistently. And in terms of the morale of our employees to contribute to the country, our staff have joined the blood donation. We worked with the Thai Red Cross, Chulalongkorn University — Hospital and Phramongkut Hospital (sic) [Phramongkutklao Hospital]. They arranged for the facility. This is our pride and joy.

We also pull together donation funds nearly THB 1 million. The sum doesn’t matter. It’s the spirit that counts.

We — our staff also joining cloth mask and face shields to public hospitals. And even our top executives also joined employees. Apart from PTT, our subsidiaries also joined the and according to our people strategy because we are people-centered.

We also established a Palungjai Center to conduct communication internally. We instruct our people to work from home in compliance with government regulations. The AGM will be rescheduled to around June or July.

For example, today, we have maintained distance and we fit in quite well, and we are able to telecast live, using technology.

Work at home — during the intensively work-at-home period, nearly 90% of us work at home, only 10%, critical operation. People are here. And in the production site, we divide people into 2 or 3 batches. We make sure that no visitors are allowed. We do quarantine. We do streaming. We implement self-isolation. So from Feb until now, we have 0 infection amongst our staff and we do hope this will continue going forward.

And so in terms of production of natural gas and petrochemicals, it’s business as usual for us. And therefore, energy security, fuel security and petrochemical security, we are fully prepared as usual.

And these are the highlights. And to the left — to my left, what we have done on the 7th of April, because U.S.A used to be intensive user of oil and they have to import the bulk from America, Africa. But lately, they have become self-sufficient as well as export team. And so downstream, we reckon that we should have branch in America for our global footprint now that we have in Shanghai, Singapore, London. And now, we have incorporated PTT USA (sic) [PTTT USA] registered capital of USD 5 billion (sic) [USD 5,000]. And it’s strictly a trading company. It is not investing. We can monitor the futures market. We can prepare promptly and we can do trading in earnest when it comes to shale oil, shale gas produced in the U.S.A. We have completed that on the 7th of April.

Secondly, for NGV, we are able to discount. We can provide a reprieve for 3 months as public good, public service. But in terms of adjusting the price according to cost, the government has allowed PTT to bring price on par with cost. We are still selling at lower than cost, but we are making headways. What we have not — so our — so the gaps have been narrowed and it’s going to get better. And the general price is about THB 15.3 per kilo, which allows us to carry on with NGV, which is a form of public good.

For gas operation plant, Unit 5, there is we — well, they have conducted the planned shutdown for 20 days from 20th of Jan to 8th of Feb and they reduced the production for maintenance, CEO, to remove a unit in order to increase the efficiency for CO2 extraction. And plant Unit 1, they have done 2-day shutdown.

And amongst our affiliates, the operations affect the operating results of PTT as well. For example, EP, they have invested. They have done the exploration and production sharing agreement in Oman, along with Total, mostly oil and gas.

For GPSC, we have good news as well. It is able to establish a subsidiary, Global Renewable Power. GPSC is emphasizing, apart from energy generation, they focus on renewables as well. So this new subsidiary is in the direction of renewables. We acquired this new capacity of 39.5 megawatts. There remains a duration of 25 years.

And we have also done IPO filing for PTT OR on the 2nd of April. In terms of details, we are going to sell about 3 billion shares. Am I right, CFO? I cannot say yet, right? I’m not supposed to disclose yet. So I’ve already appeared on video. We are in the process of filing and this is — these are what we have done.

For the turnaround, GC,as well as IRPC at the refinery for PP and ABS.

In terms of project progress, RA #6 Ratchaburi, CEO, the 2021 many projects will be COD over the next couple of years. So this is reshaping or reorienting our organization towards energy, LNG, exploration, production of natural gas heading towards petrochemical and more specialty products. So these are underway.

Next, key drivers. You will see that, April, we are heavily affected from Q1 in the aftermath of the lockdowns. April, May, top left, dollars per barrel, and they have fallen across the board. In the absence of demand as a result of lockdown, people isolate, government-imposed quarantine measures because the disease spread very quickly and it can kill. And that is why the world is still in the preventive mode, in social distancing mode because we don’t know whether people are infected or not. And so the drastic falls in demand are people who spend time flying or in closed plane flights are grounded. And therefore, Jet-A1, which accounts for about 10% to 15% of total of crude have been wiped out by [7% to 80%]. Depending on the country, some countries whose — which are tourism-dependent are heavily affected. So each country situation is different in terms of pricing. So we suffer.

I have to be clear that certain businesses are not affected, for example, energy, but it affects our stock resulting in stock losses because, in refineries, we have to make contingency according to legal reserve or contingency for long-distance carriers. So refineries take about 1 to 2 months to adjust the stock. So this is what is happening in terms of operating results.

For Q1, likewise, for NG, the JKM spot have nosedived. Why? Because mega projects, supplies are on the way versus dampened demands. And when people work at home, when economies stagnate, tourism is flat, hotels are unused, catering are closed at night instead of operating night hours using energy, and so there is oversupply of LNG. So this is the challenge. LNG has never been this low before JKM in the past. In ’18, about $10 or so; in ’19, we already suffered. But now Q1, only $4. By April, it’s $3.

In any case, this presents opportunity for upstream to look at how they can manage the import of LNG.

Next is petrochemical, and we have to look at different variety. Certain types are used day-to-day like plastic, food packaging. But in terms of certain PPEs that are used for durable goods, for freight use, air-con units, electronics, cars, these will be bad. So we have to differentiate per item. Like when China suffered, it will fall towards end of Q4 and Q1. It just kept falling because China is the world’s factory. And so they produced textile, polyester, PETs, PP and contracted consumption, and hence, the nosedive. So these are the spreads. So at first, we thought ’19 was bad — worse than ’18; but 2020 worse than 2019. But when China got back on its feet, spreads start to pick up again.

So spread PP-naphtha are on the rise, whereas many factories outside China could not reduce. But we can still produce. So this is the opportunity for our group that we can carry on with the production. So they are picking up for petrochemical and we can still function.

Next is foreign exchange. Baht depreciating through our wish, hovering between 33, 32 would be perfect for us because we are U.S. dollar-spec but we want to change into baht for long.

So these are the key drivers in the horizon. Many things are beyond our control because crude, we only use 1% to 2% but we import 18% to 19%. Petrochemicals are natural gas-based and good base.

So petrochemical price for Southeast Asia, we cannot control either. They follow the market mechanism.

First is the performance. I would like to invite CFO.

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Pannalin Mahawongtikul, PTT Public Company Limited – CFO [3]

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Good morning, everyone. Before I start to report to you, I would like to tell you that in this quarter, we started to use the accounting standards that’s applied from January 1, 2020. That includes TFRS 9, the financial reporting; and TFRS 16, which is standard — accounting standard, accounting standard regarding the lease agreement, which applies since January 1, 2020. However, with regard to the COVID-19 and relaxation measure is issued for us to provide the options. The relaxation allowed us to do, for example, the loss of the measure of the fair value, the assessment of the asset impairment and the asset evaluation. That’s relaxation. However, most of the time PTT does not apply those relaxation measures. So this is my initial statement.

So come back to the performance. As you have already known, we already reported the performance, yesterday on May 11. And you can see that for this quarter, we reported a loss at THB 154 million (sic) [THB 1.554 billion]. Yet you can see that in detail, our operating net income remains positive, however, because we are confronted with the high stock loss, which is about THB 35 billion. And if it’s PTT alone, it’s only THB 15 billion. So this affects our consolidated performance.

So I will start ahead, the revenue. I will start by saying it on a Q-on-Q — mainly on Q-on-Q because this is the most updated. So I will focus my statement on Q-on-Q. Regarding the revenue, because of the COVID-19 pandemic and because of the price war in April has affected the average of Dubai oil price. So Q1, the average price reduced from US 50 per barrel in Q1. It also affects the petrochemical price and these results in the income of Q1 PTT income.

And aside from the sales price, the sales volume was also down.

Regarding the EBITDA, it was down by 52%. And the reaction is mainly a result of the high stock loss, which was about THB 35 billion.

In addition, it was also a result of the sale price, the margin of sales price to industrial customer linked to the FO price and spread of the olefin, which is also down, SOS, lower sales volume. And I will talk in details later.

Regarding the net profit — net income, sorry. Most of the time, we continued to enjoy profit because of the stock loss, SOS. The FX loss amount to THB 5 billion, whereas in Q4, regarding the tax income that is higher, about THB 2.5 billion because of the depreciation of Thai baht. At the same time, we enjoyed gain from the derivatives of about THB 700 million.

In Q1, we did not have any extra expenses. If you remember, in Q4 last year we had to have about THB 2.1 billion fine of the litigation and the impairment of the PR Thai project. So that’s why in Q1, we report loss of about THB 1.5 billion.

So in terms of breaking down in each business group. PTTEP, you may already heard about the analyst meeting of PTTEP. In terms of sales, average sales price of PTTEP in Q1 was down by 7% based on the lower gas price. At the same time, sales volume was down 8% Q-on-Q, mainly as a result of the Malaysian project as well as the Bongkot Project, which we bought less gas.

However, in Q1, PTTEP enjoyed gain on derivatives whereas the operating expense also was also down yet the tax income was higher because of the depreciation of Thai baht.

The tax income was higher of about THB 283 million. As a result, the net profit of PTTEP was about THB 275 million.

Regarding the EBITDA. So right now, it involves the gas and trading business. PTT EBITDA is you can see Q4 is about — no, Q1 is about THB 15 billion, which was down by 4% Q-on-Q. And in details, you can see that the natural gas business Q-on-Q EBITDA was down by 7%. So this is a result of the S&M EBITDA was down by 45%. This is a result of the average sales price to industrial customers, which was down because the FO price. Although our sales price was at the market price, however, it was based on 3 months price. As a result, the sale price is down. However, the costs remained the same. That’s why the EBITDA was down quite sharply. Yet sales volumes in Q1 was down by 2% from 4,704 to 4,632. And this was because of the sales to GSP #5 is down by 5%. The utilization rate of GSP was down from 60 — 96% to 92%. Sales to industrial customer was up by 6% because Q4 last year, GC experienced turndown by 54 days. So that’s why sales volume was down in Q4 last year.

For TM, EBITDA was higher by 7%. This is because sales income was slightly down from based on the declining volume yet the cost of sales was also down because the rent becomes the right-of-use based on the new accounting standards and also gradually recorded as amortization.

At the same time, because of the COVID-19 and the price war, we try to control the expenses of the entire group through the strategy. So we are able to reduce the expense. And that’s why the performance in this quarter has the lower effect.

Regarding the GSP in Q1. It was about THB 1.8 billion, and it was down by 30% compared to Q4 last year. Sales volume was down by 12% because of the maintenance, the turnaround of the GSP and the average sale price was also down, whereas feed cost was slightly down and that’s why the cost of GSP was down.

NGV for Q1, the loss was down by 41%. And as I said before, because oil was cheap and people switched from NGV to oil instead, and that’s why sales of NGV was down by 8%. And the average sale price was slightly up by 1% as the CEO has already said that we offered the subsidy to public transport. That’s why the operations — the performance of NGV was slightly better.

In terms of others, most of the time it involves the LNG. EBITDA was higher by 13%. And they have — they enjoyed gain on derivative and the import volume was also higher.

For PTT NGV, the sales price to industrial customer in Q1 was higher than Q4 because of the 1-month lockdown. And in Q4, they have a sharp loss, and that’s why the price in Q1 was quite stable compared to Q4.

For trading. We see that EBITDA Q-on-Q is higher by 79% mainly. If you look into the details, we see that volume of trading is down, but they have higher gross margin by about 20% from 5 to 6 (inaudible) due to the reduction of domestic and gain on derivatives and sales volume is down by 9%. And as a result, the overview of trading, EBITDA is higher by 79%.

And we already touched upon that this year because OR has a split. So last — so they have completely separated and that’s why we discuss this separately in the oil business given the COVID situation and the plunge in oil price affect oil business in terms of sales volume as well. We see that demand globally for Thailand are down — oil price is down, resulting in sales volume of oil business is down by 7% Q-on-Q.

But if we look at gross margin, we will see that the gross margin is higher by about 19% from 1.4 to — 1.04 to 1.24. When oil price hit rock bottom, the pressure is eased slightly resulting in gross margin improvement.

Looking at our EBITDA. We find that for oil business, it’s up by 8% Q-on-Q. In part, it is attributable to their cost-cutting efforts PTT group-wide, mostly staff, PR expenses, outsourcing. So these helped the performance of OR. In any case, they suffered stock loss as well, higher stock loss from Q4 THB 1.1 billion, in Q1 they have THB 3 billion-or-so stock loss for oil.

Looking at oil EBITDA, it’s higher by 27% chiefly due to higher revenue and expansion of Cafe Amazon with 90 more branches from 2,000 to 3,000. And the gross profit is due cost-cutting efforts.

International and after businesses, EBITDA is higher from 55% last quarter to THB 198 million, mainly from PTT Laos and Cambodia due to higher sales volume with the expansion of stations network and benzene sales because the government adjusted the price with time lag from the market and that is why the EBITDA is higher.

Trading, we have gone through it. Now for petrochemical and refinery, P&R BU. The CEO mentioned that petrochemical price have gone down, olefins, the spread. We compare with naphtha, GC is actually gas-based and this is the — so GC spread is down as well in line with the sales price. And the sales volume in terms of aromatics have gone down also because of the planned shutdown for maintenance. 39 days, 35 and 37 days, respectively. Utilization rate of olefins is also down from 100% to 89%. Therefore, both spreads and volumes affected the performance.

Whereas for aromatics. So benzene and PX prices are down Q-on-Q. But if we look at the spread, the spread is actually higher. PX is a little bit higher, but for benzene the spread is higher considerably because Q1, well, due to the planned shutdown maintenance amongst many operators in the region and less export. And that’s why the spread of benzene looks quite healthy. Utilization rate of PX is higher from 87% to 97%. Therefore, performance for the aromatics improved both in terms of spread and volume.

For refinery, we see that the market GRM of PTT Group in Q1 has gone down from 2.19 to 0.84 — or $0.84 per barrel in Q1 due to the spread compared with feedstock that is down across product type due to COVID, which have pressured demand so heavily and many countries imposed lockdowns. And so demand has basically been wiped out and the drastic fall of oil price and stock loss.

And the next factor is NRV. The stock loss minus NRV, 9-point something. And hedging gain of about 90%. So accounting GRM is in the deficit of 7.39 in Q1.

In Q1 this year, stock loss of P&R alone is about THB 21 billion; NRV loss, about THB 10 billion. So altogether, THB 32 billion, in red. And Q4 stock gains, altogether, THB 1.3 billion.

So these will — these effects net impact for P&R at a loss of THB 31 billion compared with last Q when there’s profit of THB 1.9 billion.

So the normal operating results are okay, but in the event of high stock loss, it affects the performance of this quarter.

Now to coal business. If we look at New Castle price, it is a little bit higher, 1% Q-on-Q from $67 to $68 per ton. But average selling price for PTT’s coal business, the sale price is slightly higher because in this quarter, we sell top quality coal and we fetch better price. And so the average selling price is higher than New Castle.

Looking at volume. Compared with Q4, it is slightly down, so down by about 1%. But if we look at the net profit, it is higher from minus $1 million to a profit of $12 million, mainly because of the tax rebate because we won the tax lawsuit. So we received the payback and that’s why the net position for coal business in this Q — in this quarter is higher.

For GPSC, we will see that electricity business in Q1, the volume is — sales volume is higher by 4% to 5,093 gigawatt hour because Q4 there’s planned shutdown of Sriracha. In Q1, there’s no planned shutdown. And Q1, the sales volume to EGAT is higher according to the offtake agreement. Even though that’s lesser to industrial users because the shutdown for maintenance according to plan. The average sales price for SPP is higher by 3% from THB 2.99 per gigawatt hour to THB 3.07 per gigawatt hour.

The gas cost is down by 2% from THB 278 to THB 273 MMBtu compared with less maintenance and higher EAF for Sriracha, and that’s why the net profit for Q1 is at THB 1.5 billion or 38% higher Q-on-Q.

Now let’s take a look at the waterfall. As I mentioned, if we look only at operating net income for Q1 compared with Q4, in fact, net income is at THB 17 billion, down by 17% compared with Q4. But if we at the net profit in the face of higher stock loss, it dragged down to the loss territory.

Let’s take a look at the breakdown, which are factors that impact this picture. It’s mainly because of lower gross margin and mainly due to less gross margin of EP, which is down by about THB 4 billion; trading by THB 4 billion or so. But trading, even though gross margin is down, it has derivatives gains. So they square off each other. Gas margin is down by about THB 2.3 billion whereas others gross margins are higher. For example, petrochemical and refinery. If we do not take into account that cost, net gross margins are actually higher due to volume and better aromatics spread.

For stock loss, I already mentioned, it’s at THB 35 billion.

OpEx this quarter — our OpEx has improved by about THB 7 billion, chiefly because of the measures, the cost-cutting measures, we implement across PTT Group.

Depreciation is higher by about THB 50 million. And amortization impact, it has to do with the new accounting standard.

Other income is in the positive territory by about THB 1.9 billion because, in Q4, we have nonrecurring items. As I say, the NACAP lawsuit and the depreciation of the gas pipeline and we don’t have that in this Q. FX and derivatives, down by THB 1 billion. Actually, FX gain has decreased by THB 8.8 billion due to softer markets and derivatives gain is also down. And the commodity hedging gains are higher mainly because of EP and trading.

The interest, CIT expenses are positive factor at THB 14 billion because mainly NCI is down whereas — were in line with less operating results. Interest payments are higher due to more loans and higher taxes. EP have to pay, and as a result, it is in the minus.

In terms of balance sheet, total assets end of Q1, THB 2.5 trillion, about 10% higher. For cash and short-term investment, it’s slightly lower, about THB 2.8 billion because we started spending money in investment projects or paying back loans. And so cash and short-term investments is down because we spent more money. And AR and other current assets are also down by about THB 66 billion due to less account receivables and reduced sales volume and also less inventories due to pricing and volume factors.

Other noncurrent is higher by about THB 64 billion. The right-of-use due to the new accounting standards, resulting in higher value of these assets.

PPE higher by about THB 20 billion due to EPs and impact of the baht and construction projects of PTT and subsidiaries, the CFP of ThaiOil, olefins, the reconfiguration project and GC’s project and the fifth gas pipeline and so PPE is higher.

Overall liability is higher by about THB 95 billion, consisting of receivables and other debts down THB 7 billion, in line with the oil price and less volume and assets outstanding due to dividends and taxation. Short and long-term interest-bearing debt are higher by THB 40 billion according to the lease agreement, which increased by about THB 42 billion according to new accounting standard and long-term higher due to baht depreciation. And so when we convert loans into baht, figures are the higher. Short-term loans are down by about THB 10 billion because we pay off short-term loans by GPSC.

For shareholders part, down due to net losses and we also paid out a dividend for second quarter, THB 31 billion, and other components, mainly due to the FX and the losses of some subsidiaries.

In terms of financial ratio, net debt-to-EBITDA in this quarter is higher from 1.14 to 1.57 due to both factors. And net debt is higher because it incorporates higher debt due to the lease agreement in the face of lower operating results and so the — but under the new equation, this ratio is higher. Net debt-to-equity is slightly higher from 0.25 to 0.30. So debt is higher and equity is lower, but overall, at the macro level, the financial status of PTT Group remained solid.

Regarding the cash flow statement, you can see that cash flow from operation is around THB 61 billion.

However, we have the cash outflow from investing, which is about THB 69 billion. So most of the time, it was investment in CapEx around THB 43 billion. As I have already told you, investment was about THB 1.9 billion. Current investment, this was about a short-term investment, for example, the fixed deficit belong to PTT and ThaiOil. And then there was a dividend of an interest received of around THB 2 billion. And that’s why cash flow for investment remained out of around THB 1.8 billion.

Regarding financing activities. It was a cash out of around THB 27 billion. Loans — short-term loans, long-term loans as well as debt under the lease agreement, net with new loans, it remained cash out of around THB 39 billion.

Regarding finance costs paid of around THB 7 billion, and we also paid THB 585 million as dividend plus THB 153 million — ordinary share issuance of GEC of THB 153 million. So — and then we have the loan of about — around THB 19 billion in this quarter. So we have to pay loans of about THB 10 billion more than last quarter. And that’s why it’s a cash-out financing of around THB 27 billion. That’s why the cash out at about THB 38 billion.

However, at the start of the period, we have about — so together, ending cash of THB 254 billion and current investment of about THB 73 billion. So altogether, at the end of the quarter, we have THB 327 billion.

So right now, I would like to give the floor to Khun Auttapol.

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Auttapol Rerkpiboon, PTT Public Company Limited – CEO, President, Secretary to the Board & Director [4]

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Good morning, everyone. So start from the global economic outlook. You can realize the effects of the COVID-19 IMS forecast that the world GDP would be around minus 3%. In — for the U.S. economy, it’s going to be minus 5.9%; in Europe, it’s going to be minus 7.5%; Japan, minus 5.2%; and Thailand would be minus 6.6%. China and India, will enjoy a positive GDP. India — the number of the infected persons compared to the population of about 1 billion, so the ratio is quite low and that’s why India is going to recover faster.

So no need to talk about negative factors. We will focus on positive factors. During the next 6 months, the situation should be better because every country tried to provide stability into the system through finance — financial and fiscal policy and in hope that it’s going to stimulate the economy during the latter half of the year.

However, what we should focus is the second round or the third round of the outbreak, whether it’s going to be — to happen or not. And this may not be taken into consideration in the outlook. However, we hope that towards the end of the year, the situation is better.

In terms of Thailand economic outlook, every institution forecast a minus GDP growth. BOT forecast minus 5.3% and the highest is minus 6.8% and this is because of the structure of the Thai economy. We heavily depend on tourism and export and it hit us a very hard.

Positive factors is in the stimulus packages of the Thai government and we have to monitor to what extent it’s going to be effective. And another positive factor is because of the low price of energy, then production costs will become lower.

And one thing that we need to monitor is the second round and the third round of outbreak after the relaxation, after the ease of the measures.

Next is the petroleum and gas outlook. The energy sector has to confront with the double effect. Aside from the COVID-19, at the end of Q4 last year, you have already heard that there was disagreement among the OPEC country members and after the COVID-19 and then they tried to talk with each other again yet the economy effect was very high. And we expect that in Q2 of 2020, the use of oil will be down by 17 million barrel per day. And for the entire year, the demand will be down by 9 million barrel per day. And the OPEC come back to the table and discuss with each other and they will start lower the production by 9.7 million barrel and in July by 7.7 million barrels and this will continue towards earlier 2021 by lowering the production of 5.8 million. So this is based on 44 million barrel per day. So this the reaction from that base.

So if you look at the figures, you can see that the lower production costs and the even more — much lower consumption performance in Q2 of this year is not going to be good, yet we expect that the average Dubai oil price will stay at about USD 30 to USD 40 and the spread will — diesel will be about USD 10 to USD 12. The spread is lower from last year because of the FX that I have already told you before. And the diesel spread is also lower because of the IMO effects. And the spot price of gas and LNG demand was also lower and the inventory in China and Japan and South Korea remained high. That’s why price should be lower than Asian spot. LNG is going to be $2.7 to $3.7 per 1 million BTU. And that’s the price of the energy.

For petrochemical, for olefins. Apart from the impact of slowdown, there’s new supply for both PE and PP in Malaysia to the tune of 400,000 ton per year. So this will pressure the price to be lower. We project HDPE at $770 to $790 and PP about $860 to $880 per ton.

Whereas, aromatics, demand is down due to the textile industry, auto parts. Electric goods are also impacted. And on the supply front, there will be PX from Saudi Aramco and Sinochem 800,000 tons per year. They will start producing end of this year. This will pressure the prices. So aromatics price should be lower than 2019 by about 30%.

For polystyrene, the price would be about $900 per ton.

Next, I would like to talk about COVID impact and mitigation plan of PTT Group. Well, in terms of impact, EP, we forecast that it will affect sales by about to 7% compared with the plan.

For PTT, the gas pipeline, we anticipate no impact because we have committed volume from regulator. For sales and marketing, we anticipate less impact from the power generation and industrial users. GSP will be affected by demands of petrochemical and LPG customers.

Overall, total gas volume will be down between 5% to 10% for PTT LNG. It should not be affected, on the other hand, terminal Phase 1 will be better utilized due to more import of LNG.

Trading business, the volume will be down by 3% to 5%. PTT OR retailing of oil and non-oil, the impact will correspond with the GDP situation and dampen consumption. P&R, the capacity will reduce by 10% to 20% compared with last year, but stay in the range of 80% to 90%. But before that, actually, our group ran beyond 100%. When it’s impacted, it stay in the range of 80% to 90%. So compared with utilization outside the group, they will be down by 30%. So our decrease is less compared with peers. But a small proviso, the major impact will be the stock loans as the CFO has elaborated previously.

Impact on GPSC, the electricity use should be down by about 0.7% compared with the expansion of 2% to 3% forecast earlier. So GPSC will affected.

In terms of PTT Group’s mitigation plan, we have established a PTT Group Vital Center to look at the group level. So we synergized the top executives across PTT Group. We follow the 4 strategies, first, looking at resilience. And we improved our resilience to operate the business going forward and looking at safety and protection for our staff. So it’s a very, very good news that we have 0 infection amongst PTT workforce. So we must do our best to keep this sterling record.

And the stress test for the organization, financial business stress test, they spend smarter and prioritize both OpEx and CapEx through organization across the value chain in the face of lower demands and liquidity management as CFO is looking at it very intensively.

Second R is restarting, which is about looking at us and the whole supply chain to normalize and restart whenever normalcy is returned and we must bring back our level of competitiveness.

So the first 2 Rs, resilience, restart. The last 2 Rs are on the management front. In order to handle or manage the new or next normal, the third R is reimagination. Gearing ourselves with new business designs, upstream, downstream, new S-Curves, we review it across the board, what we have to adjust the new business models or new approaches to work.

And the last R, further to reimagination, it takes probably reform or restructure of our businesses to accommodate the next normal.

We focus more intensely on the 2 Rs. We are planning the strategic thinking sessions over the next month or so. We will very much focus on the last 2 Rs.

And the result of — as a result of stress tests conducted, I reaffirm our solid financial standing minus committed CapEx. We are able to invest. But of course, we have to revisit our investment plans in light of the new phase of business.

Regarding the decrease, discard and defer OpEx. We will cut it by 10% to 15% across the group. In PTT itself, we are eyeing on the target of THB 7 billion. And each subsidiary, they have their own targets. So all told, it’s 10% to 15%.

And CapEx, we seek to reduce by 10% from THB 260 billion or so, but projects that are under construction we proceed. For example, #5 gas pipeline, ThaiOil or GC retrofit project, these will proceed according to original plans.

And what has happened? Well, the trend for the latter half of 2020, gas price trend, it should be down, the pooled gas price. GSP, major turnaround is planned for Q2 for GSP Unit 1 for about 25 days. And turndown of GSP 5 by about 50% in order to maintain inventory management in light of less demand. And gas separation plant #5, #6, we will replace equipment according to plan.

For NGV, LPG. In terms of subsidy, NGV, mid-March, the regulator endorsed the public support policy and that is passed on to PTT to reduce the price of NGV for 3 months from 1st of April to end of June and maintain the price for public vehicles at THB 15.31 per kilo effective from 16th of March to 15th of August in order to assist the consumers.

LPG, we expand subsidy through the use of state welfare smart card. The maximum subsidy of THB 30 million until June.

And with EGAT — between EGAT and PTT, there is progress. The contracts has been approved by the Board of PTT and EGAT. It is being reviewed by the office of the Attorney General. The signing is slated to happen soon.

PTT’s construction projects are still proceeding as planned, be it the floating solar 15 megawatts for IRPC, COD is expected soon; Nava Nakorn for GPSC, increased capacity from 60 to 185 megawatts, COD 3Q; Map Ta Phut retrofitting of GC according to plan, COD in the latter half of this year.

For various maintenance schedule details, we will stick to them, and that’s all we have in terms of presentation. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

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